M sees a rare spike in near-term call volume

As Macy's, Inc. (NYSE:M) prepares to step into the earnings confessional next week, bullish bettors are zeroing in on the stock today. Roughly 12,000 calls have crossed the tape thus far, which is about eight times the norm. For comparison's sake, just over 8,200 puts have been exchanged. Meanwhile, the equity's 30-day, at-the-money implied volatility has ticked higher, up 1.6 percentage points (or 5.7%) from yesterday's close.

The clear front-runner is the September 49 call, where north of 10,000 contracts have changed hands at a volume-weighted average price (VWAP) of $1.32. Today's volume has exceeded current open interest levels, signaling the addition of new positions. According to Trade-Alert, a hefty portion of these calls were purchased by a single speculator. In order for him to profit from these bought-to-open contracts, M must ascend past breakeven at $50.32 (strike price plus the VWAP) by back-month expiration. This reflects an increase of 4.4% from the stock's present perch at $48.18. The delta for these options sits at 0.43, meaning they have a 43% chance of moving into the money by the close on Sept. 20.

This penchant for calls over puts is a deviation from M's recent trend in the options pits. The security's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio stands at 1.65, indicating puts bought to open have easily outpaced calls during the past two weeks. This ratio ranks higher than 88% of similar readings taken over the past 12 months, meaning traders have been scooping up puts over calls at a faster-than-usual pace.

Likewise, Schaeffer's put/call open interest ratio (SOIR) checks in at 1.43, conveying puts outnumber calls among options with a shelf-life of three months or less. This ratio is just 7 percentage points shy of a 12-month peak, signaling near-term speculators have rarely been more put-heavy toward the stock during the past year. An unwinding of these bearish bets -- particularly within the front-month series of options -- could end up serving as a contrarian tailwind, as August expiration draws closer.

Technically speaking, Macy's, Inc. (NYSE:M) had advanced close to 24% so far this year. On the charts, the shares continue to hover above their 10-month moving average, which has served primarily as support since April 2009.

As alluded to earlier, the retailer is due to report quarterly earnings before the market opens on Wednesday, Aug. 14, and has bested consensus bottom-line estimates in each of the past eight quarters. On average, the stock has gone on to inch 0.2% higher a week after posting. For the second quarter, analysts are expecting a profit of 79 cents per share.